Looking at Coal Stocks for Next Trade

Congrats for those who bought SIRI (wish I had it), congrats for those who bought CENX and still have the shares not taken away in a mini flash crash (like mine). I'm moving on, and I'm thinking coal.

Why? Because it looks like one of the last remaining commodities that haven't broken out. The other one is crude oil, but at least I've caught the last week's big move with UCO calls (sold half today).

I'm looking at the charts for:

MEE (Massey Energy)
ANR (Alpha Natural Resources)
PCX (Patriot Coal)
BTU (Peabody)
ACI (Arch Coal)

BTU and ACI look strong, and may be doing the triple top breakout on the 3-year weekly chart. MEE, ANR, PCX all look alike, and they are still basing.

BUCY (Bucyrus) looks ready for double top breakout, too, on the weekly. It actually looks like a very deep cup and handle, with the handle part itself is a cup. Its competitor, JOYG (Joy Global), has already broke out.

Fundamental reason for coal? The world may be entering "global cooling", not "warming". We may need more carbon in the air to keep the planet warm...

I am also looking at uranium companies, for the same reason. In severe cold, wind and solar just don't cut it. USU (Usec) seems to be forming a symmetrical triangle after wild moves.

As usual, do your own DD.

So, Harvest Moon Right After Equinox Did the Trick!

and the Harvest Moon was accompanied by two majestic planets - Jupiter and Uranus. (For more on those astrological portents, read my other blog from Wednesday.)

Congrats to longs, and congrats to anyone holding CENX without trailing stop. Those crooks aka market makers took away my shares when they so artificially slammed the stock yesterday at the open and take out my CENX at the lowest of the day.

Hats off to Takeit on Yahoo board who predicted the gap and run for Friday.

My own tell was alas, sadly, again, Q-man at Tickerville. He was negative on Thursday.

Now where do we stand?

Here's S&P500 daily. Do I see a reverse head and shoulders? Yes I've been seeing that. It looks like a breakout from that pattern to me. The target then is above April high. In between, I think there's a fair chance of the index to at least go as high as 50% retracement (1174, May high after the flash crash) from the neckline (1130) to April high (1219).


If it can retrace all the way and then more and hit the pattern target, then the bigger picture does indicate it could go above 1300. The last time the index was above 1300 was August 2008, right before the cascading crash.

Oh wait, didn't I say that before? Yes I did, but that was right before the flash crash... Oh well, scratch that. Maybe this post on fractal patterns is more like it... Like I say, this is an entertainment, not an advice, ever.

Who knows.. With the Federal Reserve intent on convincing the rest of us that the stock market IS the economy by pumping so much money via QELite (aka POMO) almost every other day...

CENX for Aluminum Shortage Play?

(Well RIMM was a dud...)

I bought a small position on CENX today, after seeing it was breaking out on a larger volume from a nice consolidation pattern that also has a MACD positive divergence.



Then I just read this news at Kitco.com:

"(Kitco News) -Harbor Intelligence looks for three-months aluminum to hit $2,400 per metric ton on the London Metal Exchange in the weeks ahead. Harbor cites expectations that Chinese output will fall, given two years of “negative economics for producers” and pressure on smelters to cut production to meet energy-saving and environmental goals. The most recent data implies that China lost 6%, or a net 982,752 metric tons, of annualized aluminum output in July and August. Meanwhile, demand for semi-aluminum products (autos, construction, etc., which are the main customers of primary output) in China is rising, with a monthly gain of 14% in August, which amounts to annualized output of 2.9 million tons, Harbor says. Ultimately, demand for primary and scrap aluminum will accelerate due to a pick-up in final demand and re-stocking needs for semi-aluminum producers. “Our models show increasing risks of a strong rally in aluminum prices in the final quarter of this year,” Harbor says. A rise toward $2,400 in the fourth quarter will also exert upward pressure on regional aluminum premiums around the world, Harbor adds."

My buy point was $11.62. Trailing stop at 6% loss, first target is a gap-fill above $13.

Shoulda, Coulda: RIMM

The last RIMM post I had here was late July, for it to break down from $55. Well that happened.

I've been watching RIMM since for several weeks, and I've kept saying to myself, "positive divergence, positive divergence..." in MACD. Despite the analysis of the stock that I read on fundamentals, which are downright dismal, I saw this divergence and I thought "You know what, the stock may pop any time, surprising everyone." And the first target would be $50, I thought to myself just yesterday. Yesterday's close was $45.52.

Well well. It may happen, after all. Research In Motion reported its earnings AH today and it beat estimates. The share price went up 4.54% in after hour trading, to $48.60.

Here's the divergence that I saw and didn't act on it. Oh well. C'est la vie. (Oh BTW, anyone who acted on SIRI, congrats! It took a while but now it seems to be on its way further up.)


If the general market stays up, it may not be too late to buy in. Watch 60-period slow stochastics to see if it crosses above 20 (buy signal). Do your own DD, this post is nothing but entertainment.

(And why don't I listen to my own advice? The whole point of starting this blog was to get it out there so that I would actually see what I think and follow my own advice once in a while...)

SIRI May Be Getting Ready to Break Out

Sirius XM Radio Inc. (SIRI) may be ready to break out, if the general market breaks out higher. I don't know anything about the company or its fundamentals; from what I hear it is a POS to say it mildly.

But the daily chart is showing a symmetrical triangle pattern, which is a continuation pattern, and the previous trend was up, albeit erratic. A symmetrical triangle pattern seems to break in the direction of the general market. Resistance at the upper downward trendline, at about $1. Target would be the breakout point plus the height of the triangle = $1.42.


What I like about this recent pattern is that the erratic move of this stock since late last year has calmed down enough to form a constructive pattern. That usually precedes a big move.

Today Nasdaq had a follow-through day with a huge gain on a larger volume. Dow and S&P500, though the gain was significant, didn't have enough volume to qualify as a follow-through day. Maybe after the severe beating that the market took, bit stocks like SIRI may float to the surface rapidly. Just maybe.

But don't take my word for it. This is not an advice or recommendation. Do your own DD.

Silver Breaking Out: SLV

Whatever got into the poor man's gold (that's silver) today (8/25/2010), it pretty much had a TA textbook breakout from a pennant or triangle formation.

Here's a 6 month daily chart of SLV, an ETF that tracks silver (and is supposed to be backed by physical silver, though no one with a working brain believe it). This breakout would put the target price of SLV at $20.84.



In a 3-year weekly chart, SLV seems to have formed a cup and handle, and the handle is shaped as a pennant. The target based on that formation is over $30.



I bought SLV when it was slightly below $12 in April 2009 and I have kept it ever since. Unlike my gold ETF (DGP, also a long-term holding), SLV has never dipped below my buy point. I have no intention of selling either of them anytime soon.

I've read analyses by gold/silver bugs saying silver will go much higher percentage-wise than gold. I've seen a target price of $100. Well, if J.P.Morgan Chase is forced to cover its silver naked short positions, that should do the trick...

Third Confirmation of Hindenburg Omen Today

or 4th occurrence in 9 trading days (August 12, 19, 20, and 24). For more, see Zero Hedge.

The stock market seems and feels under heavy stress every day, and the struggle gave way today near the close. This is not good for the remaining longs.

Remember the "Cardinal Climax" that was supposed to happen around August 1? Maybe it was delayed and is happening right now...

Second Confirmation of Hindenburg Omen

says Zero Hedge, noting also the Iranian nuclear reactor event on Saturday:

"Longs may be forgiven if they are sweating their long positions over the weekend: not only did we just have a second, and far more solid Hindenburg Omen confirmation today, with 82 new highs, and 94 new lows, but the Saturday is the day when Iran launches its nuclear reactor, and everyone will be very jumpy regarding any piece of news out of the middle east. As for the H.O., the more validations we receive, the greater the confusion in the market, and the greater the possibility for a melt down (or up, as the case may be now that the market is unlike what it has ever been in the past). Furthermore, with implied correlation at record levels (JCJ at around 78), any potential crash will be like never before, as virtually all stocks now go up or down as one, more so than ever before. And should the HFT STOP command take place, the future should be very interesting indeed (at least for the primary dealers, and the Atari consoles which are unable to VWAP dump their holdings in the nano second before stuff goes bidless)."

Be very careful out there. Back to back Hindenburg Omen (see the previous post for the first confirmation, which was yesterday), I bet it's the first...

On the other hand, you could argue that this stock market is so broken with HTF algo-bot infestation, regulatory incompetence (SEC and CFTC), regulatory power-grab (FinReg bill aka Dodd-Frank bill aka Donk bill) that a Hindenburg Omen now occurs regularly, signaling absolutely nothing.

Uh Oh... Hindenburg Omen Confirmed

From Zero Hedge today:

"Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 - a week later the H.O has been confirmed. The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy (like every other technical indicator)."

As a reminder, the criteria for the Hindenburg Omen is in my August 13 post, one day after the first H.O.

German Bourse Looks Much Better than US Counterparts

Amid an incredible amount of "doom and gloom" (most recently the Hindenburg Omen), I went looking for a constructive (if not downright cheerful) chart. I'm a contrarian in nature, and when just about everyone (not just people like Gerald Celente and Peter Schiff) is doomy and gloomy, it's either everyone is right for once or everyone is wrong again.

Anyway, I found a constructive chart, and it is German DAX Composite.

The 3-year DAX weekly chart shows the index is still above the 40-MA, unlike the US indices which struggled to fully regain that line and ended the week below. The correction that started in late April looks more like a consolidation, forming an ascending triangle pattern above the 40-MA. If the ascending triangle pattern plays out, the target would be 7027. That's about the target of the point and figure chart also. The index ended the week at 6110.


Germany's economy grew by 2.2% in the second quarter, the fastest in 20 years since the reunification. It grew by making things that people around the world want to buy, even at a premium. It grew DESPITE the government stimulus, which many in Germany acknowledge was misspent and probably unnecessary.

A stark contrast to the US.

Hindenburg Omen on August 12, 2010

Just so you know.

It doesn't mean we will have a market crash, but they say all major market crashes were preceded by the Hindenburg Omen.

The Hindenburg Omen criteria from Wikipedia:

The traditional definition of a Hindenburg Omen has five criteria:

1. That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
2. That the smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues.
3. That the NYSE 10 Week moving average is rising.
4. That the McClellan Oscillator is negative on that same day.
5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen.

A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

The Hindenburg Omen mechanism can be applied to other stock exchanges like Paris, Berlin, Tokyo or Sydney but the criteria for it must overall be the same.

Go with the Index (Bearish) or Individual Stocks (Bullish)?

A bit of a conundrum.

While I continue to wait for FAS to break out (FOMC meeting just in time...), I don't know which way the market may break. On the major indices like Dow and S&P500, I see a rising wedge pattern with declining volume (=bearish) coupled with negative divergence on MACD. But if I look at individual stocks, I see a reverse head and shoulders pattern (=bullish), FAS being one of them.

Here's a take from Matthew Frailey at Breakpoint Trades (from their free newsletter).

Bull Flag on FAS?

Is it finally breaking out?



(Of course you would have been better off trading JPM or GS for the last month...or even MS.)

CCJ Gapped Up, So Did GLW

A gap up this morning is taking Cameco (CCJ) half way to 50% Fib. And another materials stock that's been on my watch list for eternity is breaking out, too.

Corning (GLW). Like CCJ, I've been watching this for a company-specific, fundamental reason and not TA reason. Yesterday I read about how Corning's super-strong glass from half a century ago was finally finding profitable applications in electronics. I went to look at the chart, and what I saw was a rather sloppy consolidation for the past two weeks or so. I thought it was too sloppy for a decent breakout, but I liked the news of this super-strong glass named Gorilla. Just see the chart today. A huge gap up (up 5%). What do I know...


Materials sector seems particularly strong. Another one that's gapped up today is Freeport-McMoran (FCX). FCX has broken out from a better formed flat-top consolidation (than GLW). Congrats to those who are in these stocks. I wish I were.

Second Bull Flag on CCJ

Focusing too much on the major indices is not a very smart thing to do if you simply want a good trade. See the trees instead of the forest, in other words. Since algo bots latch on to the indices and index ETFs and a few beta big caps on Nasdaq, some less-known individual stocks may be still relatively free of bots.

Here's one example. Cameco (CCJ) has been on my watch list for very long time. I invested in the stock once, from . I kept watching mainly for macro and fundamental reasons (Cameco is a uranium miner). Last I looked at the chart was more than a year ago, and the stock hasn't gone anywhere. It is actually back to where it was a year ago.

But if you just look at the short-term, it would have been a good enough trade.

This is CCJ's 9-month daily chart. It seems to be forming a second bull flag after breaking out of the first one. There is a positive divergence in MACD and RSI. Slow (very slow at 89) stochastics has already signaled a buy, when it crossed 20, and when it crossed 50. 13-EMA and 34-EMA have also crossed back, signaling a significant trend change.


The stock just passed 38.2% Fibonacci retracement from the July low to the January high. It could go to 50%. Between 50% and 61.8% there seems to be a lot of overhead resistance. If you had bought the stock when the slow stochastics crossed 20, you might be sitting now with 20% gain in a month. Not bad in a volatile market.